The Right Way To Cut The Deficit (and Save Social Security)

It was the absurdly low rate on those forms of income — just 15 percent — that yielded Mitt Romney’s embarrassingly small tax payments. And that’s what also led to Warren E. Buffett’s lament that his tax rate was lower than his secretary’s…

President Obama has proposed much of the needed adjustment, including eliminating the special treatment of dividends and raising the tax on capital gains to 20 percent for the rich.

Personally, I would go further and raise the capital gains rate to 28 percent, right where it was during the strong recovery of Bill Clinton’s first term, and grab hold of a total of $300 billion of new revenues over the next decade…

Another important step toward tax fairness would be to address the indefensibly low 15 percent tax rate on the famous “carried interest,” the fee received by private equity and certain hedge fund investors…

Another productive area for raising revenue would be limiting deductions available to the wealthy. The highest-income Americans don’t need tax-free health insurance, mortgage interest deductions or deferred taxation on retirement funds.

Mitt Romney himself proposed an efficient and effective approach: just limit the total amount of deductions. Even excluding charitable deductions from this limitation — as I would personally advocate — capping deductions at $25,000 would raise large amounts of revenue, an estimated $885 billion over the next 10 years…

And while we are at it, taxing all FICA income, rather than just the first $110,000, will save Social Security for decades.